OM Group Announces First Quarter 2013 Financial Results
Cobalt business divestiture completed; Debt substantially repaid; Share repurchase program underway; Progress on cost-reduction initiatives
CLEVELAND, May 2, 2013 /PRNewswire/ -- OM Group, Inc. (NYSE: OMG) today announced financial results for the first quarter ended March 31, 2013. The Company reported adjusted EBITDA of $35 million, excluding the results of its Advanced Materials cobalt business and charges related to cost-reduction initiatives. As announced on March 29, 2013, the Company completed the sale of its cobalt business, and it subsequently used the proceeds along with cash on-hand to repay $374 million of its debt. The Company recognized a non-cash loss on the sale of $112 million, or $3.49 per diluted share. Excluding the loss on sale, first quarter results of Advanced Materials and charges of $4 million related to cost-reduction initiatives in its other businesses, the Company reported adjusted diluted earnings per share from continuing operations of $0.15. On a GAAP basis, the Company reported a loss from continuing operations of $3.43 per diluted share.
"We made great progress in the first quarter on both our strategic and business objectives," said Joe Scaminace, Chairman and Chief Executive Officer of OM Group, Inc. "The sale of the cobalt business and debt pay-down strengthens our balance sheet, providing us with the capacity and flexibility to execute our growth strategy. We returned capital to shareholders in the form of share repurchases, and we recently welcomed David Knowles to our management team as President and Chief Operating Officer.
"During the quarter we also made progress on our cost-reduction initiatives, which contributed to our strong EBITDA performance. Overall, we are pleased with our start to the year, and our EBITDA expectation for the full year 2013 remains at $120-$140 million, despite the recent announcement to divest our ultra pure chemicals subsidiaries by June of this year." The Company's forecast excludes Advanced Materials and charges related to cost reduction initiatives.
The Company ended the quarter with $115 million of cash and $93 million of debt. Cash flow used in operating activities in the quarter was $18 million, including an outflow related to the operations of the cobalt business of $8 million. In the second quarter of 2013, the Company expects to receive an additional $27 million related to the divestiture of Advanced Materials to settle working capital, and $60 million for the sale of the ultra pure chemicals business. In January, the Company announced that the Board of Directors authorized a share repurchase program of up to $50 million of common shares. During the quarter, the Company returned $5 million to shareholders in the form of share repurchases.
First quarter 2013 sales of $364 million were 22 percent lower than in the prior year comparable quarter, primarily due to lower cobalt prices in the Advanced Materials business and lower rare-earth pricing effects in the Magnetic Technologies business. Excluding the Advanced Materials business and the effects of rare-earth pricing, net sales in the 2013 first quarter were $278 million, 3% lower than the first quarter of 2012 but 8% higher sequentially than the fourth quarter of 2012. Magnetic Technologies volumes improved from last quarter, and Battery Technologies achieved record sales. Specialty Chemicals sales levels were down slightly on lower demand caused by weak macroeconomic conditions in certain key end markets.
The Company previously announced a broad range of cost reduction initiatives to improve financial performance and optimize its cost structure. These initiatives are expected to contribute $10-20 million of savings in 2013 at a cost of $15-$20 million, and will better position the Company for expanded profitability as macroeconomic conditions improve. During the first quarter of 2013, the Company realized benefits of $2 million from these initiatives.
Mr. Scaminace concluded, "This is an exciting time at OM Group. We are confident in our ability to grow our three value-added platforms, which all have attractive organic and strategic growth paths. And we have the financial capacity and discipline to continue to invest in our future while at the same time returning capital to shareholders. We are well-positioned to execute our strategy and create long-term shareholder value."
Webcast Information
OM Group has scheduled a conference call and live audio broadcast on the Web for 10 AM EDT today. Investors may access the live audio broadcast by logging on to http://investor.omgi.com. A copy of management's presentation materials will be available on OMG's website before the call. The company recommends visiting the website at least 15 minutes prior to the webcast to download and install any necessary software. A webcast audio replay will be available on the "Investor Relations - Presentations" page of the company's website three hours after the call.
About OM Group
OM Group is a technology-based industrial growth company serving attractive global markets, including automotive systems, electronic devices, aerospace, industrial and renewable energy. Its business platforms use innovative technologies and expertise to address customers' complex applications and demanding requirements. For more information, visit the Company's website at www.omgi.com.
Forward-Looking Statements
The foregoing discussion may include forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions and are subject to uncertainties and factors relating to the company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the company. These uncertainties and factors could cause actual results of the company to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. Such uncertainties and factors include:; uncertainty in worldwide economic conditions; extended business interruption at our facilities; fluctuations in the price and uncertainties in the supply of rare earth materials and other raw materials; our ability to identify, complete and integrate acquisitions aligned with our strategy; changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns; the majority of our operations are outside the United States, which subjects us to risks that may adversely affect our operating results; level of returns on pension plan assets and changes in the actuarial assumptions; the majority of our cash is generated and held outside the United States; the timing and amount of common share repurchases, if any; fluctuations in foreign exchange rates; unanticipated costs or liabilities for compliance with environmental regulation; changes in environmental, health and safety regulatory requirements; technological changes in our industry or in our customers' products; our ability to adequately protect or enforce our intellectual property rights; disruption of our relationship with key customers or any material adverse change in their businesses; successful execution of the GTL supply agreement signed in connection with the Advanced Materials sale; and the risk factors set forth in Part 1, Item 1a of our Annual Report on Form 10-K for the year ended December 31, 2012.
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OM Group, Inc. and Subsidiaries | ||||
|
Unaudited Condensed Consolidated Balance Sheets | ||||
|
March 31, 2013 |
December 31, 2012 | |||
|
(In thousands) |
||||
|
ASSETS | ||||
|
Current assets |
||||
|
Cash and cash equivalents |
$ 115,229 |
$ 227,612 | ||
|
Accounts receivable, net |
165,250 |
174,613 | ||
|
Inventories |
263,371 |
463,093 | ||
|
Other current assets |
53,355 |
74,258 | ||
|
Total current assets |
597,205 |
939,576 | ||
|
Property, plant and equipment, net |
342,385 |
496,755 | ||
|
Goodwill |
429,440 |
543,269 | ||
|
Intangible assets, net |
411,838 |
429,672 | ||
|
Other non-current assets |
60,702 |
90,155 | ||
|
Total assets |
$ 1,841,570 |
$ 2,499,427 | ||
|
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
|
Current liabilities |
||||
|
Current portion of long-term debt |
$ 8,750 |
$ 13,309 | ||
|
Accounts payable |
82,058 |
128,381 | ||
|
Purchase price of VAC payable to seller |
75,397 |
75,351 | ||
|
Other current liabilities |
126,732 |
162,204 | ||
|
Total current liabilities |
292,937 |
379,245 | ||
|
Long-term debt |
83,750 |
454,054 | ||
|
Deferred income taxes |
108,725 |
121,451 | ||
|
Pension liabilities |
226,738 |
233,823 | ||
|
Purchase price of VAC payable to seller |
11,266 |
11,259 | ||
|
Other non-current liabilities |
50,354 |
55,446 | ||
|
Stockholders' equity: |
||||
|
Total OM Group, Inc. stockholders' equity |
1,067,800 |
1,206,710 | ||
|
Noncontrolling interests |
- |
37,439 | ||
|
Total equity |
1,067,800 |
1,244,149 | ||
|
Total liabilities and equity |
$ 1,841,570 |
$ 2,499,427 | ||
|
OM Group, Inc. and Subsidiaries | ||||
|
Unaudited Condensed Consolidated Statements of Operations | ||||
|
Three Months Ended March 31, | ||||
|
2013 |
2012 | |||
|
(In thousands, except per share data) |
||||
|
Net sales |
$ 364,254 |
$ 466,179 | ||
|
Cost of goods sold |
287,561 |
366,869 | ||
|
Gross profit |
76,693 |
99,310 | ||
|
Selling, general and administrative expenses |
62,653 |
64,874 | ||
|
Operating profit |
14,040 |
34,436 | ||
|
Other income (expense): |
||||
|
Interest expense |
(8,269) |
(12,212) | ||
|
Interest income |
67 |
152 | ||
|
Foreign exchange gain (loss) |
(2,344) |
(5,021) | ||
|
Loss on divestiture of Advanced Materials business |
(111,546) |
- | ||
|
Other, net |
(756) |
(291) | ||
|
Income (loss) from continuing operations before income tax expense |
(108,808) |
17,064 | ||
|
Income tax expense |
(2,581) |
(5,080) | ||
|
Income (loss) from continuing operations, net of tax |
(111,389) |
11,984 | ||
|
Income (loss) from discontinued operations, net of tax |
(73) |
(136) | ||
|
Consolidated net income (loss) |
(111,462) |
11,848 | ||
|
Net (income) loss attributable to noncontrolling interests |
1,749 |
101 | ||
|
Net income (loss) attributable to OM Group, Inc. common stockholders |
$ (109,713) |
$ 11,949 | ||
|
Earnings per common share — basic: |
||||
|
Income (loss) from continuing operations attributable to OM Group, Inc. |
||||
|
common stockholders |
$ (3.43) |
$ 0.38 | ||
|
Income (loss) from discontinued operations attributable to OM Group, Inc. |
||||
|
common stockholders |
(0.01) |
(0.01) | ||
|
Net income (loss) attributable to OM Group, Inc. common |
||||
|
stockholders |
$ (3.44) |
$ 0.37 | ||
|
Earnings per common share — assuming dilution: |
||||
|
Income (loss) from continuing operations attributable to OM Group, Inc. |
||||
|
common stockholders |
$ (3.43) |
$ 0.38 | ||
|
Income (loss) from discontinued operations attributable to OM Group, Inc. |
||||
|
common stockholders |
(0.01) |
(0.01) | ||
|
Net income (loss) attributable to OM Group, Inc. common |
||||
|
stockholders |
$ (3.44) |
$ 0.37 | ||
|
Weighted average shares outstanding |
||||
|
Basic |
31,928 |
31,874 | ||
|
Assuming dilution |
31,928 |
32,032 | ||
|
Amounts attributable to OM Group, Inc. common stockholders: |
||||
|
Income (loss) from continuing operations, net of tax |
$ (109,640) |
$ 12,085 | ||
|
Income (loss) from discontinued operations, net of tax |
(73) |
(136) | ||
|
Net income (loss) |
$ (109,713) |
$ 11,949 | ||
|
OM Group, Inc. and Subsidiaries | ||||
|
Unaudited Condensed Consolidated Statements of Cash Flows | ||||
|
Three Months Ended March 31, | ||||
|
2013 |
2012 | |||
|
(In thousands) |
||||
|
Operating activities |
||||
|
Consolidated net income (loss) |
$ (111,462) |
$ 11,848 | ||
|
Adjustments to reconcile consolidated net income (loss) to net cash used for operating activities: |
||||
|
(Income) loss from discontinued operations |
73 |
136 | ||
|
Depreciation and amortization |
22,705 |
22,149 | ||
|
Amortization of deferred financing fees |
1,050 |
1,370 | ||
|
Share-based compensation expense |
1,582 |
2,407 | ||
|
Loss on divestiture of Advanced Materials business |
111,546 |
- | ||
|
Foreign exchange (gain) loss |
2,344 |
5,021 | ||
|
Other non-cash items |
8,607 |
4,907 | ||
|
Changes in operating assets and liabilities, excluding the effect of divestitures |
||||
|
Accounts receivable |
(19,055) |
(27,481) | ||
|
Inventories |
(2,200) |
9,672 | ||
|
Accounts payable |
(13,589) |
(38,936) | ||
|
Other, net |
(19,935) |
(4,668) | ||
|
Net cash used for operating activities |
(18,334) |
(13,575) | ||
|
Investing activities |
||||
|
Expenditures for property, plant and equipment |
(14,389) |
(10,818) | ||
|
Proceeds from divestiture of Advanced Materials business |
302,086 |
- | ||
|
Proceeds from sale of property |
- |
5,138 | ||
|
Net cash provided by (used for) investing activities |
287,697 |
(5,680) | ||
|
Financing activities |
||||
|
Payments of long-term debt |
(374,038) |
(5,419) | ||
|
Payment related to surrendered shares |
(554) |
(254) | ||
|
Share repurchases |
(4,982) |
- | ||
|
Net cash used for financing activities |
(379,574) |
(5,673) | ||
|
Effect of exchange rate changes on cash |
(2,172) |
2,690 | ||
|
Cash and cash equivalents |
||||
|
Increase (decrease) in cash and cash equivalents |
(112,383) |
(22,238) | ||
|
Balance at the beginning of the period |
227,612 |
292,146 | ||
|
Balance at the end of the period |
$ 115,229 |
$ 269,908 | ||
|
OM Group, Inc. and Subsidiaries | |||
|
Unaudited Segment Information | |||
|
Three Months Ended March 31, | |||
|
(In thousands) |
2013 |
2012 | |
|
Net Sales |
|||
|
Magnetic Technologies |
$ 137,149 |
$ 190,491 | |
|
Battery Technologies |
41,034 |
37,032 | |
|
Specialty Chemicals |
99,822 |
105,913 | |
|
Advanced Materials |
86,438 |
132,973 | |
|
Intersegment items |
(189) |
(230) | |
|
$ 364,254 |
$ 466,179 | ||
|
Operating profit (loss) |
|||
|
Magnetic Technologies (a)(b) |
$ 6,359 |
$ 13,903 | |
|
Battery Technologies (a) |
8,319 |
5,655 | |
|
Specialty Chemicals (c) |
6,949 |
13,521 | |
|
Advanced Materials |
1,746 |
11,111 | |
|
Corporate |
(9,333) |
(9,754) | |
|
$ 14,040 |
$ 34,436 | ||
|
(a) The three months ended March 31, 2013 include charges related to cost-reduction initiatives of $3.9 million and $0.2 million in Magnetic Technologies and Battery Technologies, respectively. | |||
|
(b) The three months ended March 31, 2012 include inventory step-up charges of $15.7 million resulting from purchase accounting for the VAC acquisition. | |||
|
(c) The three months ended March 31, 2012 include a $2.9 million property sale gain. | |||
|
OM Group, Inc. and Subsidiaries | |||||||||||||
|
Unaudited Non-U.S. GAAP Financial Measures, Adjusted Operating Profit and Adjusted EBITDA | |||||||||||||
|
Three Months Ended March 31, 2013 | |||||||||||||
|
(in thousands) |
Magnetic Technologies |
Battery Technologies |
Specialty Chemicals |
Corporate |
Subtotal |
Advanced Materials |
Consolidated | ||||||
|
Operating profit - as reported |
$ 6,359 |
$ 8,319 |
$ 6,949 |
$ (9,333) |
$ 12,294 |
$ 1,746 |
$ 14,040 | ||||||
|
Charges related to cost reduction initiatives |
3,856 |
168 |
38 |
- |
4,062 |
- |
4,062 | ||||||
|
Adjusted operating profit |
10,215 |
8,487 |
6,987 |
(9,333) |
16,356 |
1,746 |
18,102 | ||||||
|
Depreciation and amortization |
10,765 |
2,503 |
5,173 |
61 |
18,502 |
4,203 |
22,705 | ||||||
|
Adjusted EBITDA |
$ 20,980 |
$ 10,990 |
$ 12,160 |
$ (9,272) |
$ 34,858 |
$ 5,949 |
$ 40,807 | ||||||
|
Three Months Ended March 31, 2012 | |||||||||||||
|
(in thousands) |
Magnetic Technologies |
Battery Technologies |
Specialty Chemicals |
Corporate |
Subtotal |
Advanced Materials |
Consolidated | ||||||
|
Operating profit - as reported |
$ 13,903 |
$ 5,655 |
$ 13,521 |
$ (9,754) |
$ 23,325 |
$ 11,111 |
$ 34,436 | ||||||
|
VAC inventory purchase accounting step-up charges |
15,728 |
- |
- |
- |
15,728 |
- |
15,728 | ||||||
|
Gain on sale of property |
- |
- |
(2,857) |
- |
(2,857) |
- |
(2,857) | ||||||
|
Adjusted operating profit |
29,631 |
5,655 |
10,664 |
(9,754) |
36,196 |
11,111 |
47,307 | ||||||
|
Depreciation and amortization |
10,212 |
2,502 |
5,096 |
115 |
17,925 |
4,224 |
22,149 | ||||||
|
Adjusted EBITDA |
$ 39,843 |
$ 8,157 |
$ 15,760 |
$ (9,639) |
$ 54,121 |
$ 15,335 |
$ 69,456 | ||||||
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In order to assist readers of our financial statements in understanding the operating results that the Company's management uses to evaluate the business, we are providing adjusted operating profit and adjusted EBITDA, both of which are non-U.S. GAAP financial measures. The Company's management believes that these are important metrics in evaluating the performance of the Company's business, providing a baseline for evaluating and comparing our operating results and isolating the impact of certain items on our results. The table above presents a reconciliation of the Company's U.S. GAAP operating profit - as reported to adjusted operating profit and adjusted EBITDA. The non-U.S. GAAP financial information set forth in the table above should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. | |||||||||||||
|
OM Group, Inc. and Subsidiaries | |||||||
|
Unaudited Non-U.S. GAAP Financial Measures | |||||||
|
Three Months Ended |
Three Months Ended | ||||||
|
March 31, 2013 |
March 31, 2012 | ||||||
|
(in thousands, except per share data) |
$ |
Diluted EPS |
$ |
Diluted EPS | |||
|
Income (loss) from continuing operations attributable to OM Group, Inc. common stockholders - as reported |
$ (109,640) |
$ (3.43) |
$ 12,085 |
$ 0.38 | |||
|
VAC inventory purchase accounting step-up and lower of cost or market charges |
- |
- |
15,728 |
0.49 | |||
|
Gain on sale of property |
- |
- |
(2,857) |
(0.09) | |||
|
Loss on Advanced Materials divestiture |
111,546 |
3.49 |
- |
- | |||
|
Charges related to cost reduction initiatives |
4,062 |
0.13 |
- |
- | |||
|
Tax effect of special items |
(576) |
(0.02) |
(4,856) |
(0.15) | |||
|
Adjusted income from continuing operations attributable to OM Group, Inc. common stockholders |
$ 5,392 |
$ 0.17 |
$ 20,100 |
$ 0.63 | |||
|
Exclude: Operating results from divested Advanced Materials business, net of tax |
570 |
0.02 |
6,432 |
0.20 | |||
|
Adjusted income from continuing operations attributable to OM Group, Inc. common stockholders - pro forma excluding Advanced Materials |
$ 4,822 |
$ 0.15 |
$ 13,668 |
$ 0.43 | |||
|
Weighted average shares outstanding - diluted - as reported (a) |
31,928 |
32,032 | |||||
|
(a) - On a Non-GAAP basis for 2013, because the adjusted results are net income vs. net loss on a GAAP basis, weighted average shares outstanding are 32,089. In this case, there is no change to the $0.15 Diluted EPS, adjusted pro forma. | |||||||
|
In order to assist readers of our financial statements in understanding the operating results that the Company's management uses to evaluate the business, we are providing adjusted income from continuing operations attributable to OM Group, Inc. common stockholders and adjusted earnings per common share attributable to OM Group, Inc. common stockholders - assuming dilution, both of which are non-U.S. GAAP financial measures. We are also providing the amounts as pro forma adjusted to exclude the results of the divested Advanced Materials business. The Company's management believes that these are important metrics in evaluating the performance of the Company's business, providing a baseline for evaluating and comparing our operating results and isolating the impact of certain items on our results. The table above presents a reconciliation of the Company's U.S. GAAP income from continuing operations attributable to OM Group, Inc. common stockholders - as reported to adjusted income from continuing operations attributable to OM Group, Inc. common stockholders and earnings per common share attributable to OM Group, Inc. common stockholders - assuming dilution, adjusted for both special items as identified in the table and to exclude the results of the divested Advanced Materials business. The non-U.S. GAAP financial information set forth in the table above should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. | |||||||
SOURCE OM Group, Inc.
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